It’s not surprising to find two of the IT industry’s giants, Microsoft and Google, coming to blows now and again and these two have certainly had their fair share of scraps in the past, yet the momentum of their latest clashes has been significantly noticeable and has definitely got the industry press talking. In this article we investigate what all of the hype is really about and we’ll start with a recap of what’s been happening.

September 2008
The latest round of clashes started with Google’s launch of Chrome, an alternative browser based on new technologies which enables faster loading times, improved security and a number of new features, including the sandboxing of tabs.

By sandboxing individual tabs if a single website hangs or crashes the rest of the tabs are unaffected, an innovative and useful feature. This product launch was seen as a direct challenge to Microsoft’s Internet Explorer service but in fact it makes perfect sense that Google would want some control over the method of delivering traffic to its core search business.

July 2009July saw a number of moves by both vendors. Microsoft confirmed its 10 year partnership with Yahoo! The no-cash deal will see Yahoo! use Microsoft’s Bing search engine on its own sites enabling Microsoft/Yahoo! to become a viable alternative to Google for advertisers. This partnership sees Yahoo! basically pull away from innovation in search leaving Microsoft and Google to go head to head. Together Microsoft and Yahoo! will enjoy a 28% share of the Internet search market in the US (11% in the rest of the world including the UK) but this is still well behind Google’s dominant 65% share (67% in the rest of the world).

Google announced its forthcoming operating system, Google Chrome OS. Google claims the new OS enables users to boot up and get online in seconds and includes a number of new security features. The software will be available from autumn 2010 and will be initially targeted at Netbooks although its coverage is expected to expand. The industry press are particularly excited by this bold move by Google with some hailing it as “Google dropping a nuclear bomb on Microsoft.” Previously such challenges have been more understated but this is a bold move by Google specifically targeting Microsoft’s core business.

Microsoft then announced it would be making ‘lighter’ versions of its popular Office products available online for free, directly competing with Google’s free Google Docs. The free products will include Word, PowerPoint, Excel and OneNote and will be available to anyone with a Microsoft Live account. This is thought by many industry journalists to be the first stage in Microsoft’s plan to move towards a ‘cloud’ operating system reportedly known as ‘Azure’ which is expected to be formally launched later this year.

August 2009
Google responded further with a high profile advertising campaign named “Going Google”. The campaign utilises a number of advertising methods including 4 giant bill boards located in prominent positions in major US cities. The campaign focuses on promoting the benefits of its Google Apps and is quite obviously directed at attracting customers away from Microsoft Office. This activity gained extensive coverage due to the high impact nature of the campaign and the fact that Google rarely advertises, plus of course the obvious attack on Microsoft. After Microsoft blasted through $100million launching Bing, is this Google’s way of goading Microsoft into an advertising battle, encouraging them to spend even more?

So why are they behaving this way?
While the CEOs of the respective companies can truly answer that question, many journalists and industry analysts are already speculating over this. One of my favourite explanations comes from Ryan Singel at Wired.com who states “It is, however, not a death match — it’s more of a fight to see who will be the King of Technology, since both companies pull in their billions through completely different siphons and are unlikely to severely wound one another any time soon.” He continues “Clearly top executives at each company look over at the others’ pots of gold and dream of ways to steal them, or at least make it harder for the other guy to make money.”

To some extent I agree with him. Market share data from Gartner clearly shows the immense majorities these companies hold in their respective markets. Despite launching Google chrome last September Gartner’s data for May 2009 shows it has a browser market share of just 1.8% compared to Microsoft’s IE share of over 65%. Similarly, the launch of Bing has had little impact on Google’s search market share. It currently holds over 65% and since launching Bing Microsoft’s share has only increased by a single point to 8.2% with Google still delivering over 78% of US search results.

So if it’s obvious to everyone that they’re not easily going to dent each other’s market share or revenues, why are they bothering and what is it really all about?

Software as a Service (SaaS) and Cloud Computing
In short it’s really all about SaaS (Software as a Service) and cloud computing. That is the underlying and most interesting issue within this ongoing debate. On first glance you could be forgiven for thinking this is predominantly about search but that is not really the case. Whilst Microsoft is making moves to strengthen its position within the search market it is its development of a ‘cloud based’ OS named ‘Azure’ and its announcement to provide free ‘lighter’ versions of its core Office products online that is core to this issue. Equally interesting is Google’s development of an open source browser (Chrome), an open source web based OS (Chrome OS) and its interaction with its existing Google Docs and its massive investment into creating a number of new off-shore data centres to support all of its services.

These activities all support a move towards entering the SaaS and ‘cloud computing’ market. Businesses demand for access to applications and information faster and more efficiently has led to the development of SaaS and cloud computing. Interest in this new market is growing as businesses learn more about the benefits it can bring. SaaS enables the business to utilise software applications on demand via the Internet. Instead of installing the physical software on each of the business’ PCs each user simply has a license to access the software online as and when they need it, freeing up memory on the hardware making it faster, saving costs on server requirements and making the solution more scalable.

SaaS and cloud computing is an attractive market for both Microsoft and Google. For Microsoft it represents a completely new distribution model and is something the company has been working on for several years. For Google it brings together the existing development of Google Docs, Chrome and Chrome OS.

And it’s not just Microsoft and Google that are getting in on SaaS. Less obvious companies such as Amazon have also been noticing this emerging market, launching its EC2 cloud services.

I’d watch this space, as this is where the real fireworks will happen as the two technology giants fight it out within this emerging market. The rest of their antics are nothing more than distractions and baiting, reminding each other of their presence in their respective markets. The good news is that whilst they continue with such antics they are encouraging each other to become more creative, more innovative and develop better products more competitively, which can only be a good thing for the rest of the industry and consumers. In the mean time we will just have to sit back and watch to see what gems they both come up with next. Personally I’m waiting to hear more on GDrive and Google Wave.

Have your say!
So what do you think about the two technology giants and their ongoing feuds? Do you think it is just to generate publicity or do you think any of their antics will have a significant effect on the rest of the market? And what do you think about their expected emergence into SaaS? Let us know by leaving us a comment below.